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Saturday, July 18, 2009

Poll: How much should the President make?

When I took U.S. History as a high school junior, a question on our test was, "How much does the President of the United States make in a year?" Of course, I had studied hard and I knew the answer was $250,000 (correct at the time). When our teacher returned the tests, I had missed only one question on the test (you can guess which one). It turns out that my penmanship was to blame. As my "2" in 250,000 looked like a "7," I lost four points on the exam. I knew the right answer, but I never forgot that response!

With President Obama's demands on auto executives to take pay cuts and all of the fuss about executive compensation, I thought I would turn the tables in this poll. Instead of asking the all-too-popular question of how much CEOs should make, I want to know what you think America's CEO should make. For your information, the President's salary is currently $400,000 (with $259K in other expense accounts), but he gets to ride in Air Force One, too.

So, how much should the President of the United States make per year?

(a) $1(b) $400,000(c) the median household income for that year(d) it should be tied to performance

As always, I appreciate comments on the poll almost as much as I appreciate votes. Vote early. Vote often. Tell your friends, family and your local CEO to vote. The poll is open for a week (it's over there on the sidebar ---->). I look forward to seeing what you think.

4 comments:

i guess my only comment is to dispute whether executive compensation is really tied to performance. also, how would you measure performance for a president? how many conflicts the president unilaterally enters into? GDP? productivity? sexual promiscuity or lack thereof? how much of a father figure and role model he continues to be despite his day-time job of leader of the free world? tough to quantify, perhaps, but one of the most important things that this president is offering.

Very good points... You're right. The trouble with paying based on performance is that you have to be able to adequately measure performance. And then, once you put down a quantifiable measure of performance, people will tend to game the system.

That would seem to be as true for presidents as it would be for CEOs.

Let me turn the question on its head -- at least for the comment thread -- Do you think anything positive could be accomplished by changing the president's compensation package. If so, how would you change it?

I voted 400k, but I would have voted for an option with a much higher pay package (in the several million). In general, I am in favor of paying the president and members of congress a lot of money but making it harder for them to use incumbency to hold on to power for a long period of time. Many of the wasteful things undertaken by government are undertaken for the purpose of reelection. Further, since being in government pays very poorly compared to what comparably talented people make in the private sector, our system ends up selecting for people who are enormously wealthy already and/or people who have a suspicious drive for power.

As for the comparison between CEOs and presidents: it is true that CEOs can "game" their compensation packages but this is a very different problem than what one would encounter with a similar system for presidents. Ultimately, it is pretty easy to judge the success of a company: profits. I don't care how clever the CEO is, if his company consistently loses money he will be out of a job (unless he gets bailed out!). The same is not true of a president, and there is no long run measure of success. Furthermore, if I don't like the compensation system set up for a CEO, I can simply sell my shares. The diligence and power of investors does put some discipline on the process and I don't see how voting once every 4 years can even compare.

1. In retrospect, I should have listed a higher, fixed compensation option. For anyone who wishes to vote for a higher fixed number than 400K, do what Zappa did (vote for 400K and post a comment that you would have voted for higher).

2. Some open-ended questions for everyone to ponder:

A. Low pay probably deters talented individuals from seeking public office, but I wonder, do we want a President who would be induced to be President because of better pay? Moreover, if we're worried that our elected officials are "in it for the wrong reasons," what are some good reasons?

B. Is the relatively low public service wage to blame for power-hungry individuals seeking public office? Could the power of the office be to blame? If so, how do we fix that?

C. "Many of the wasteful things undertaken by government are undertaken for the purpose of reelection." I think that's probably true (i.e., running costly re-election campaigns instead of governing comes to mind).

On the other hand, does the threat of reelection merely lead politicians to do wasteful things?

D. On the incumbent power issue, why is it that incumbents in the US tend to hold onto power? Is it experience? Good reputation? Shady back room deals? Given why incumbents hold onto office, what would be a productive way to limit incumbent power?